While most European stock markets were not trading yesterday due to public holidays, Wall Street indices gained moderately at the start of the week. On the one hand, disappointingly weak job growth in the US had boosted expectations of an imminent rate cut; on the other hand, an easing of the trade conflict between the US and China and with Mexico, as well as latest economic data from Asia had led to a more optimistic assessment of the global economy. In the negotiations, the US and Mexico had agreed on improved border protection and more decisive action against smuggling gangs, thus averting the punitive tariffs threatened by Washington on all Mexican imports for the time being. At the same time, the US government announced that it would postpone the planned increase in import duties on certain Chinese goods by two weeks until June 15. US President Donald Trump meanwhile nurtured hopes of a possible agreement between the US and China at the forthcoming G20 summit in Japan at the end of June.
Meanwhile, China's exports rose surprisingly in May despite the trade war with the US. Exports rose by +1.1% year-on-year, while analysts had anticipated a drop of -3.8%. Chinese imports, on the other hand, collapsed by -8.5%.
Japan's economy grew slightly faster than expected in the first quarter thanks to higher capital spending. The gross domestic product (GDP) thus increased by +0.6% compared to the previous quarter and a year-on-year increase in economic output of +2.2% (initial estimate: +2.1%) resulted. In the final quarter of 2018, the world's third-largest economy grew by +1.6%.
The US labor market appears to have lost considerable momentum in May. With 75,000 new jobs created (excluding agriculture), growth was well below the average of 185,000 jobs expected by analysts. In addition, job growth in April was almost 40,000 lower than previously reported at 224,000. At 3.6%, however, the unemployment rate remained at its lowest level since the end of 1969. At the same time, wages in the US continued to rise in May, albeit at a slower pace than expected. The disappointing employment growth and moderate wage increases fed the expectations on the financial markets that the US Federal Reserve (Fed) would lower key interest rates again. Due to the increasing risks from the trade conflict, a potential cooling of the global economy and subdued inflation in the US, the Fed had already paused key interest rates after the central bank had raised interest rates four times in 2018.
Survey results published yesterday by the German financial market analysis company Sentix showed that analysts' and investors' assessments of the German economy in June deteriorated. The economic expectations index fell from plus 7.9 points in May to minus 0.7 points in March, its lowest level since March 2010. According to Sentix, the trade dispute between the US and China had a negative impact on the export-oriented German economy. The Sentix economic index for the euro zone also fell in June to minus 3.3 from plus 5.3 in the previous month.
|08:30||FR||Business Climate Index||99.2|
|10:30||EZ||Sentix Investor Confidence||5.3|
|14:30||US||Producer Prices (m/m)||+0.2%|
|14:30||US||Producer Prices (y/y)||+2.2%|
|14:30||US||Core-Producer Prices (y/y)||+2.4%|
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: email@example.com
Source: LGT Bank (Switzerland) Ltd.
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